Apple will fund deferred repayment loans on its own balance sheet

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A smartphone with the Apple Pay logo is placed on top of a laptop in this illustration taken July 14, 2021. REUTERS/Dado Ruvic/Illustratio

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June 8 (Reuters) – Apple Inc (AAPL.O) plans to fund loans for its upcoming Apple Pay Later service from its corporate balance sheet, the company said on Wednesday.

Apple said its Treasury Department would decide the exact mechanism it would use to fund the loans, and funding sources could change over time. Lending and credit decisions will be handled by a wholly owned subsidiary, Apple Financing LLC.

Apple announced the pay-later service this week, offering to split purchases into four equal payments over six weeks. The service will launch later this year with Apple’s latest operating systems for iPhones and iPads and will put it in competition with existing buy-it-now-pay-later companies such as Affirm Holdings Inc (AFRM.O ) and Block Inc’s (SQ.N ) Afterpay.

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Apple’s deferred repayment loans will have no interest and no fees of any kind. To judge creditworthiness, Apple said it plans to use soft extraction of a customer’s credit and other data, such as the customer’s purchase and payment history with Apple in its stores and its online services such as the App Store.

To use the Pay Later service, Apple customers will need to connect a debit card to their Apple Pay account to fund loan repayments. A quarter of the purchase price for approved loans will be due at the time of purchase and, as with other debit card transactions, Apple will perform instant verification to ensure there are sufficient funds to cover the initial payment.

Apple will offer the loans wherever Apple Pay is accepted, both online and in physical retail stores. Payments to merchants will be made through the MasterCard (MA.N) network via a payment credential issued by Goldman Sachs Group Inc (GS.N), Apple said.

Apple Financing LLC has lending licenses in every US state where such pay later services are permitted, he added.

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Reporting by Stephen Nellis; edited by Richard Pullin

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